The Cloud transition of SAP

[Former Member]

After 40 years the Business Suite is still the flagship of SAP. It includes functional components such as ERP, CRM, SRM and SCM. The suite comes in 24 industry-specific variants. SAP partners also offer many additional preconfigured industry variant based on so-called SAP Business All-in-One systems.

The first version of Business Suite was launched in 1992. Due to constant technological innovation the software still meets all modern requirements. The core of the system however is not designed as a SaaS solution. This manifests itself in two ways:

The architecture is designed for the use by a single client. That is, each client must have its own installation. New functionality is activated for each individual installation. SAP can't centrally provide all customers new functionality. Each customer must individually installed an update on his system. It is similar to installing a new release (or update) of a desktop application such as Microsoft Office on a PC.

The software is offered in a traditional licensing model. There is no pay-per-use model in which a fee is payed per user per month. You buy the suite and pay for the use of processes and the number of users. It is similar to a consumer who has to buy a full license of Microsoft Office. It's not possible just to buy the right to use MS Word for a month.

Business Suite and BPO
To offer the Business Suite in a kind SaaS format SAP partners use BPO (Business Process Outsourcing). Your system is maintained by a hosting provider and you can use it. You do not have the costs of purchase and maintenance of hardware and system environment. Recently, you can even sign a contract with hosting parties where you only pay per user per month. Is most cases this can only be offered combined with a long term contract. Because the architecture of the core is still not designed for SaaS the hosting party will also never have the advantage of reaching a shared infrastructure. New functionality must still be installed per installation.

A big advantage of the Business Suite still remains the sheer wealth of functionality and level of integration between the various components. Many suppliers of pure SaaS solutions can't provide this. When this rich functionality and integration is required for you daily operations, the Business Suite still is the logical right choice.

Standard SaaS product
As the Business Suite can't be transformed into a SaaS solution SAP started the development of pure SaaS products. In 2007 it introduced a new SaaS-based ERP solution called SAP Business ByDesign.The product has come a long way and is still not available for all regional markets. SAP Business ByDesign is positioned as a full-fledged ERP solution for the SME market or as a solution for subsidiaries of multinationals that use the Business Suite. The standard processes by SAP customers or partners can be expanded using the development environment called SAP Business ByDesign studio.

At the Cebit of 2011 SAP also announced next generation of SaaS solutions. These solutions do not offer full ERP functionality but focus on specific processes within a line-of-business. The first solutions focused on sales and purchasing. Later that year, the portfolio expanded towards HR with a takeover of SuccessFactors . Early 2012 followed by the acquisition of Ariba to offer supplier relationship functionality and a Cloud-based trading network. In the autumn of 2012 the financial domain was covered with the launch of SAP Financials OnDemand .

The full range is on the SAP website  Overtime w'll see SAP launching more and more SaaS products. With a turnover of over 1 billion in Cloud products SAP unnoticed has positioned itself as a big Cloud vendor. Knowing SAP, the goal is to be the leader.

Building in the Cloud
A very important first questions for SAP centric customers is: "Why would I want to build in the Cloud since SAP delivers me standard software?" Reality shows that organisations what to extend the processes beyond what standard software delivered. They want to stand out from their competitors by supporting specific processes that standard software does not (yet) support. This is the reason why the Business Suite always had and integrated (ABAP & Java) development environment and supports integration by open standards through the NetWeaver platform.

To develop in the Cloud SAP delivers two PaaS development platforms:

The SAP Business ByDesign studio. This is the integrated development within Business ByDesign. Integration with existing functionality within Business ByDesign can take place by reusing and extending the existing data model much similar like in ABAP. In fact the system is ABAP based but unfortunatly does not share the same data model as the business Suite. Integration with other systems (like the business suite) are based on interfaces.

SAP NetWeaver Cloud. This platform has been available since the end of 2012 and offers an open standards-based development platform. It contains some standard services but no data model. Integration with other systems is always based interfaces.

When choosing the right PaaS platform you first question to answer is: "What is the basis of the process you want to extend?"

Roughly speaking, there are three scenarios:

Extension of SAP SaaS solution based on Business ByDesign. The SAP Business ByDesign studio is the logical PaaS platform of choice. Reuse of existing data model generally provides the best integrated and manageable solution at the lowest cost.

Extension of SAP SaaS solution that is not based on Business ByDesign. Solutions developed by SuccessFactors and Ariba are not based on Business ByDesign. Integration will therefore always be based on interfaces. Both Business ByDesign as NetWeaver Cloud can support this. In the case of a complex extension the ByDesign Platform is probably a logical choice because of its integrated functionality for data modeling.

Extension of an on-premise SAP Business Suite Process. Basically the same argument as for solutions that are not based on Business ByDesign. Integration will always be based on interfaces. Both Business ByDesign as NetWeaver Cloud can support this.

What next?
That SAP takes Cloud very seriously, is clear. Fact is that they are late. Traditional SaaS vendors have gained a serious market share in the traditional SAP installed base. To sell additional SaaS solutions to these organisations SAP solutions needs be be able to integrate and support open standards. It is therefore not surprising that during the last Sapphire and TechEd standard integration scenario's for example Salesforce were shown.

When targeting organisations, that are looking for a specific stand alone SaaS line-of-business application, SAP will have to convince the customers based on best functionality and value for money. Besides that it has to change it's traditional sales model. In the world of SaaS, customers orient themselves mostly through the Internet. Simple trial accounts that provide quick insight into functionality are crucial. In a similar way SAP has to offer a grow model where you enhance users functionality (and therefore it's monthly license fee) over time. This model has proven very successful at traditional SaaS vendors.

The PaaS based applications market is still a long way for SAP. They are the new kids on the block. Many platforms are available and have proven that they support scaled development of business critical PaaS applications. Think of the platforms such as Google, Microsoft, Amazon and Force.com. These are hugely popular with developers. Knowledge is extensive and is a lot cheaper than specialized SAP developers. Because SAP business applications more and more conforms to open standards, these platforms are relatively easy to integrate with SAP.

This gives organizations choice but also requires a comprehensive approach to architecture overview.